Pacific Rim Mechanical Contractors, Inc. v. Aon Risk Insurance Services West, Inc.
203 Cal. App. 4th 1278
| Cal. Ct. App. | 2012Background
- PacRim, an insured subcontractor, sues Aon for negligence-based claims arising from Legion’s post-issuance insolvency; Aon allegedly failed to inform PacRim of Legion’s financial deterioration after procurement of the policy by Bosa via Aon.
- Aon procured a unified OCIP policy for the project at Bosa’s request; PacRim was enrolled as an insured but not a client of Aon.
- Legion’s conservation order (2002) and later insolvency (2003) occurred after policy issuance; PacRim alleges it was not notified of Legion’s financial problems.
- PacRim claims Bosa had a contractual duty to notify PacRim of Legion’s insolvency, and that Aon owed a separate duty to inform PacRim post-issuance.
- The trial court sustained demurrer to all causes of action, relying on Kotlar to foreclose a broker’s post-issuance notification duty; judgment dismissing PacRim’s cross-complaint against Aon followed.
- On appeal, the court affirms, holding no duty exists for brokers to inform insureds of insurer insolvency absent a contractual duty or statutory duty, and declining to extend Kotlar or impose a new duty.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a broker owes a duty to inform an insured about insurer insolvency post-issuance. | PacRim argues broker must notify insured of insolvency. | Aon contends no such duty exists absent contract or explicit agreement. | No duty owed by broker absent contractual duty; affirmed. |
| Whether California public policy supports imposing a broker notification duty for insurer insolvency. | PacRim seeks new common-law duty for brokers. | Public policy does not favor creating this duty; legislature should decide. | Public policy does not support creating a new broker duty; affirmed. |
Key Cases Cited
- Kotlar v. Hartford Fire Ins. Co., 83 Cal.App.4th 1116 (Cal. App. 4th 2000) (broker duty limited to procuring coverage; no post-issuance notification duty (insurer responsibility on cancellation))
- Jones v. Grewe, 189 Cal.App.3d 950 (Cal. App. 3d 1987) (broader duty to procure insurance; limited by client-focused duties)
- Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc., 115 Cal.App.4th 1145 (Cal. App. 4th 2004) (brokers owe duty to procure the requested insurance)
- Nowlon v. Koram Ins. Center, Inc., 1 Cal.App.4th 1437 (Cal. App. 4th 1991) (duty of broker incurred in procurement/issuance of policy)
- Wilson v. All Services Ins. Corp., 91 Cal.App.3d 793 (Cal. App. 3d 1979) (broker not required to investigate insurer’s financial condition)
- Butcher v. Truck Ins. Exchange, 77 Cal.App.4th 1442 (Cal. App. 4th 2000) (public policy and duty assessment for brokers)
- Schimmel v. NORCAL Mut. Ins. Co., 39 Cal.App.4th 1282 (Cal. App. 4th 1995) (public policy on legislative creation of duties)
- Biakanja v. Irving, 49 Cal.2d 647 (1958) (test for liability for negligent performance of contractual duty to non-privity party; inapplicable here)